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The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). With the publication of this announcement via a Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain. 06 May 2020 Tekcapital PLC ("Tekcapital", the Company" or the “Group") Final Results for the year-ended 30 November 2019 Record Net Assets and Revenue for the Period Tekcapital plc (AIM: TEK), the UK intellectual property (IP) investment group focused on creating marketplace value from university technology, announces its audited results for the year ended 30 November 2019. Financial highlights Net Assets increased 40% to US$22.25m, a record level (2018: US$16.13m) NAV per share US$0.35 (2018: US$0.30) Portfolio valuation increased 48% to US$20.3m (2018: US$13.70m) Total revenue US$7.72m (2018: US$6.83m) - Revenue from services increased 15% to US$1.20m (2018: US$1.04m) - Net increase of US$6.52m in fair value of portfolio companies (2018: US$5.79m) Profit before tax: US$5.52m (2018: US$4.55m) Reduction of operating expenses by 7% to US$1.59m (2018: US$1.72m). Service revenues cover approximately 55% of cost base (cost of sales and operating expenses) Placing to raise US$0.9m completed in July 2019. Operational highlights: Material Portfolio Companies Salarius® (91.7% ownership) www.salarius.co Successfully launched MicroSalt® with the first three commercial accounts secured. Approximately 25 companies are testing MicroSalt® for inclusion in their snack food products. Appointed Mike Marrotte, V.P. Sales. Top performing sales leader and revenue growth strategist Appointed Javier Contreras as COO to further its commercialization efforts (formerly of The Clorox Company). Completed development and consumer packaging of its SaltMe!® line of full flavour, reduced sodium potato chips in 4 flavours. Engaged a leading natural food wholesaler & food broker for retail placement of SaltMe!® Engaged two leading food ingredient brokers, Accurate Ingredients, Inc. and Hanks Brokerage Inc., to sell MicroSalt® to snack food companies throughout the U.S. Filed additional patent on coverage of MicroSalt® directed to improve low-sodium salt.
Transcript
Page 1: Tekcapital PLC (Tekcapital, the Company or the Group) · Posting of Annual Report and Accounts The Company's annual report and accounts for the year ended 30 November 2019 will be

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 ("MAR"). With the publication of this announcement via a Regulatory Information Service ("RIS"), this inside information is now considered to be in the public domain. 06 May 2020

Tekcapital PLC ("Tekcapital", the Company" or the “Group")

Final Results for the year-ended 30 November 2019

Record Net Assets and Revenue for the Period

Tekcapital plc (AIM: TEK), the UK intellectual property (IP) investment group focused on creating marketplace value from university technology, announces its audited results for the year ended 30 November 2019. Financial highlights

• Net Assets increased 40% to US$22.25m, a record level (2018: US$16.13m)

• NAV per share US$0.35 (2018: US$0.30)

• Portfolio valuation increased 48% to US$20.3m (2018: US$13.70m)

• Total revenue US$7.72m (2018: US$6.83m) - Revenue from services increased 15% to US$1.20m (2018: US$1.04m) - Net increase of US$6.52m in fair value of portfolio companies (2018: US$5.79m)

• Profit before tax: US$5.52m (2018: US$4.55m)

• Reduction of operating expenses by 7% to US$1.59m (2018: US$1.72m).

• Service revenues cover approximately 55% of cost base (cost of sales and operating expenses)

• Placing to raise US$0.9m completed in July 2019. Operational highlights: Material Portfolio Companies

Salarius® (91.7% ownership) www.salarius.co

• Successfully launched MicroSalt® with the first three commercial accounts secured.

• Approximately 25 companies are testing MicroSalt® for inclusion in their snack food products.

• Appointed Mike Marrotte, V.P. Sales. Top performing sales leader and revenue growth strategist

• Appointed Javier Contreras as COO to further its commercialization efforts (formerly of The Clorox Company).

• Completed development and consumer packaging of its SaltMe!® line of full flavour, reduced sodium potato chips in 4 flavours.

• Engaged a leading natural food wholesaler & food broker for retail placement of SaltMe!®

• Engaged two leading food ingredient brokers, Accurate Ingredients, Inc. and Hanks Brokerage Inc., to sell MicroSalt® to snack food companies throughout the U.S.

• Filed additional patent on coverage of MicroSalt® directed to improve low-sodium salt.

Page 2: Tekcapital PLC (Tekcapital, the Company or the Group) · Posting of Annual Report and Accounts The Company's annual report and accounts for the year ended 30 November 2019 will be

Lucyd® (100% ownership) www.lucyd.co

• Launched sales of Lucyd Loud 3.0 audio glasses, proper prescription glasses that can be used to listen to music, answer your mobile phone or talk to Siri®.

• On track to launch Lucyd Loud Lyte in the H2 2020. Lucyd Lyte is the first prescription Bluetooth glasses that looks like traditional glasses in terms of style and form factor.

• Filed additional patent protection on Lucyd modular eyewear and trademark protection on Glasses as a Service (GaaS).

Guident (100% ownership) www.guident.co

• Filed a new patent application for controlling autonomous vehicles after an accident (patent was allowed by the USPTO post period end)

• Guident exclusively licensed a patent application from Michigan State University for an AV communication and safety network.

• Guident exclusively licensed patent # 9,964,948 from FIU which enables remote control of an AV by a human operator when necessary

• Begun its B2B marketing program to develop partnerships with vehicle OEM’s to provide remote tele-monitoring and control centre IP & technology for autonomous vehicles and land-based delivery drones.

Belluscura® (18.9% ownership) www.belluscura.com

• Continued progress with its patented portable oxygen concentrator programme

• Belluscura raised US $2.7m in 2019 at 15p/share to continue with its FDA clearance and go to market strategy equating to a post money valuation of ~US $9m.

• Belluscura anticipates receiving 510(K) clearance from the US FDA in H1 2020

• Post end of period, Belluscura filed an additional patent application covering devices and systems for treating people suffering from acute respiratory distress caused by the Coronavirus.

Operational highlights: Corporate

• Strengthened the board of directors with the appointments of Lord David Willets and Mr. Louis Castro as independent non-executive directors

Dr. Clifford Gross, Executive Chairman said: “I’m glad to report that through the collective efforts of our dedicated

and capable team we have achieved record results in 2019. The continued development of our portfolio companies

combined with improved service revenues has resulted in solid financial performance, whilst we simultaneously

reduced our operating expenses by 7%.”

Page 3: Tekcapital PLC (Tekcapital, the Company or the Group) · Posting of Annual Report and Accounts The Company's annual report and accounts for the year ended 30 November 2019 will be

Post period end portfolio company highlights

• On December 12, 2019, Salarius Ltd secured national food ingredient broker for Microsalt®. Accurate Ingredients provides network of experienced sales representatives on east and west coast of the United States.

• On 24 January 2020, Salarius Ltd secured additional food ingredient broker partner for sales of Microsalt®. The agreement with Hanks Brokerage Inc. covers primarily snack food companies in the southwestern United States.

• On 10 February 2020, Belluscura has filed an additional patent application (17 patents filed or licensed to-date) entitled “Improved Extracorporeal Membrane Oxygenation Device, System and Related Methods,” covering devices and systems for treating people suffering from acute respiratory distress caused by the Coronavirus.

• In February 2020, Salarius Ltd’s executives exercised stock options resulting in Tekcapital’s ownership being reduced from 97.5% to 91.7%.

• On 2 March 2020, Salarius Ltd announced North American distribution agreement for launch of SaltMe!® snacks. This agreement represents an important milestone for Salarius’ new potato chip snack line, enabling unprecedented reach of SaltMe!® products into consumer outlets of every size in North America.

• On 4 March 2020, Salarius Ltd announced sales partnership agreement with iLevel Brands Inc as part of its launch of North America sales of SaltMe!®. This agreement, combined with their previously announced distribution agreement on 2 March 2020, will expand Salarius’ market penetration and brand awareness for its new potato chip snack line with retail brand placements across the entire East Coast, Midwest and Southwest geographic areas of the United States.

• On 16 March 2020, Belluscura plc announced the filing of a patent application on a modular, portable oxygen enrichment ventilation system for treating patients suffering from COPD and ARDS brought on by such diseases as COVID-19.

• On 24 March 2020, Salarius Ltd announced it has received an order from its distribution partner to launch sales of its new SaltMe!® full flavor-low sodium snacks in 71 stores beginning in May 2020.

• On 26 March 2020, Lucyd Ltd announced it has filed patent and trademark on its forthcoming Vyrb(TM) app. Vyrb users will be able to active a world of smartphone actions with their voice in just moments, including social media posting. The app is designed to improve utility of Lucyd Bluetooth® glasses and wireless hearables.

• On 8 April 2020, Guident Ltd announced significant management additions including appointment of Harald Braun as Company’s CEO and appointment of Daniel Grossman as the company’s Chief Revenue Officer. The company also appointed Michael Trank as VP Software Development and Dr. Gabriel Castenada as Lead Architect, Artificial Intelligence Software. Guident has also announced that it has received a Notice of Allowance from the United States Patent and Trademark Office for its patent application # 16/386,530 entitled “Methods and Systems for Emergency Handoff of an Autonomous Vehicle” and has filed an additional patent entitled, ”Intelligent Remote Monitoring and Control of Autonomous Vehicles”.

• On 24 April 2020, Lucyd Ltd announced launch of its Bluetooth(R)-enabled glasses on the website of US superstore chain Walmart Inc.

Page 4: Tekcapital PLC (Tekcapital, the Company or the Group) · Posting of Annual Report and Accounts The Company's annual report and accounts for the year ended 30 November 2019 will be

Posting of Annual Report and Accounts The Company's annual report and accounts for the year ended 30 November 2019 will be posted to shareholders in due course and will be available on the Company's website www.tekcapital.com shortly. For further information, please contact:

Tekcapital Plc Via Flagstaff

Clifford M. Gross, Ph.D.

SP Angel Corporate Finance LLP (Nominated Adviser and Broker)

+44 (0) 20 3470 0470

Richard Morrison/Charlie Bouverat (Corporate Finance) Abigail Wayne / Rob Rees (Corporate Broking)

Flagstaff Strategic and Investor Communications +44 (0) 20 7129 1474

Tim Thompson/Andrea Seymour/Fergus Mellon

About Tekcapital plc

Tekcapital creates value from investing in new, university-developed intellectual properties and provides a range of IP investment services to make it easy for organisations to commercialise university-developed technology. Tekcapital is quoted on the AIM market of the London Stock Exchange (AIM: symbol TEK) and is headquartered in Oxford, in the UK. For more information, please visit www.tekcapital.com LEI: 213800GOJTOV19FIFZ85

Page 5: Tekcapital PLC (Tekcapital, the Company or the Group) · Posting of Annual Report and Accounts The Company's annual report and accounts for the year ended 30 November 2019 will be

Risk Factors and Forward-Looking Statements

The information contained in this document has been prepared and distributed by the Company and is subject to material updating, completion, revision, verification and further amendment. This Report is directed only at Relevant Persons and must not be acted on or relied upon by persons who are not Relevant Persons. Any other person who receives this Report should not rely or act upon it. By accepting this Report the recipient is deemed to represent and warrant that: (i) they are a person who falls within the above description of persons entitled to receive the Report; (ii) they have read, agree and will comply with the contents of this notice. The securities mentioned herein have not been and will not be, registered under the U.S. Securities Act of 1933, as amended (the “Securities Act”), or under any U.S. State securities laws, and may not be offered or sold in the United States of America or its territories or possessions (the “United States”) unless they are registered under the Securities Act or pursuant to an exemption from or in a transaction not subject to the registration requirements of the Securities Act. Neither this Report nor any copy of it may be taken or transmitted into the United States, or distributed, directly or indirectly, in the United States, or to any “US person” as defined in Regulation S under the Securities Act of 1933, including US resident corporations or other entities organised under the laws of the United States or any state thereof or non-U.S. branches or agencies of such corporations or entities. This Report is not being made available to persons in Australia, Canada, Japan, the Republic of Ireland, the Republic of South Africa or any other jurisdiction in which it may be unlawful to do so and it should not be delivered or distributed, directly or indirectly, into or within any such jurisdictions.

Investors must rely on their own examination of the legal, taxation, financial and other consequences of an investment in the Company, including the merits of investing and the risks involved. Prospective investors should not treat the contents of this Report as advice relating to legal, taxation or investment matters and are advised to consult their own professional advisers concerning any acquisition of shares in the Company. Certain of the information contained in this Report has been obtained from published sources prepared by other parties. Certain other information has been extracted from unpublished sources prepared by other parties which have been made available to the Company. The Company has not carried out an independent investigation to verify the accuracy and completeness of such third party information. No responsibility is accepted by the Company or any of its directors, officers, employees or agents for the accuracy or completeness of such information.

All statements of opinion and/or belief contained in this Report and all views expressed represent the directors’ own current assessment and interpretation of information available to them as at the date of this Report. In addition, this Report contains certain “forward-looking statements”, including but not limited to, the statements regarding the Company’s overall objectives and strategic plans, timetables and capital expenditures. Forward-looking statements express, as at the date of this Report, the Company’s plans, estimates, valuations, forecasts, projections, opinions, expectations or beliefs as to future events, results or performance. Forward-looking statements involve a number of risks and uncertainties, many of which are beyond the Company’s control, and there can be no assurance that such statements will prove to be accurate. No assurance is given that such forward looking statements or views are correct or that the objectives of the Company will be achieved. Further, valuations of Company’s portfolio investments and net asset value can and will fluctuate over time due to a wide variety of factors both company specific and macro-economic. Additionally, the current Coronavirus epidemic may produce negative economic activities which could reduce the company’s economic performance and the performance of its portfolio companies in ways that are difficult to quantify at this juncture. It may cause a recession in the markets in which the Company operates, reduce the Company’s net asset values, revenue, cash flow, access to investment capital and other factors which could negatively impact the Company. The reader is cautioned not to place reliance on these statements or views and no responsibility is accepted by the Company or any of its directors, officers, employees or agents in respect thereof. The Company does not undertake to update any forward-looking statement or other information that is contained in this Report. Neither the Company nor any of its shareholders, directors, officers, agents, employees or advisers take any responsibility for, or will accept any liability whether direct or indirect, express or implied, contractual, tortious, statutory or otherwise, in respect of, the accuracy or completeness of the information contained in this Report or for any of the opinions contained herein or for any errors, omissions or misstatements or for any loss, howsoever arising, from the use of this Report. Neither the issue of this Report nor any part of its contents is to be taken as any form of contract, commitment or recommendation on the part of the Company or the directors of the Company to proceed with any transaction or accept any offer and the right is reserved to terminate any discussions or negotiations with any prospective investors. In no circumstances will the Company be responsible for any costs, losses or expenses incurred in connection with any appraisal or investigation of the Company. This Report should not be considered a

Page 6: Tekcapital PLC (Tekcapital, the Company or the Group) · Posting of Annual Report and Accounts The Company's annual report and accounts for the year ended 30 November 2019 will be

recommendation by the Company or any of its affiliates in relation to any prospective acquisition of shares in the Company. No undertaking, Report, warranty or other assurance, express or implied, is made or given by or on behalf of the Company or any of its affiliates, any of its directors, officers or employees or any other person as to the accuracy, completeness or fairness of the information or opinions contained in this Report and no responsibility or liability is accepted for any such information or opinions or for any errors or omissions. or opinions or for any errors or

Page 7: Tekcapital PLC (Tekcapital, the Company or the Group) · Posting of Annual Report and Accounts The Company's annual report and accounts for the year ended 30 November 2019 will be

Chairman's statement

Tekcapital brings innovations from lab to market that enhance safety and health and improve the quality of life. In

2019, all our active portfolio companies have made significant progress and portfolio holdings value increased by 48%.

We have also grown our service revenues by 15%, including portfolio company management fees and R&D related tax

credits. As a result, our profits and net assets ended the year at record levels.

Key portfolio companies

Using our proprietary global university network, we provide services to universities and companies to help them

commercialize their innovations. Over the past four years, using these services, we have built a compelling group of

portfolio companies to commercialize high value properties we have uncovered. We believe that when you couple

commercialization ready, compelling university IP with strong senior management, vibrant companies will emerge,

net assets will grow, returns on invested capital will outperform the sector and exits will occur faster. When we realise

exits through trade sales or IPO’s, the Group’s goal is to distribute a portion of the proceeds as a special dividend to

our shareholders.

Salarius is a food tech business that owns a patented process to produce nanoparticle sized salt. These small crystals dissolve faster on the tongue, so you need to use less salt, while still having the same salty taste. Less salt means about 50% less sodium. Less sodium means a reduced likelihood of developing heart disease, the world’s number one killer. Post-period, Salarius has added additional senior management with Fortune 500 company manufacturing experience and is expected to begin selling Salarius salt and snacks in Q4. According to Future Market Insights, the low sodium

ingredient market is estimated to reach US$1.76bn1 by 2025. Tekcapital owns 91.7% of Salarius. Key Investment Rationale: Whilst consumers continue to crave salted snacks, there is a significant trend for better for you, health conscious foods that taste good. As heart disease continues to rise and represents the leading cause of premature death in the world, reducing sodium in the foods we eat is of paramount and continuing importance. Lucyd has built a new, online eyeglass business that combines technology with traditional eyewear. Recently they introduced Lucyd Loud 3.0 upgraded Bluetooth® eyewear. This product combines proper prescription glasses with

Bluetooth technology that you can use to answer your phone, listen to music, and talk with Siri®. The product has been well received and the company is focused on expanding its sales with retail distribution through sporting goods and other specialty stores in 2020. Lucyd has also developed and filed approximately 20 patents on modular Bluetooth eyewear that enables the consumer to quickly and inexpensively change the look of their glasses. The company anticipates launching this new product in 2020 along with Lucy Lyte, the first Bluetooth prescription eyewear, that

look like regular glasses in terms of their streamlined form factor. According to Statista2, the current online market for eyewear is $3.8b per year. Tekcapital owns 100% of Lucyd. Key Investment Rationale: Digital assistants have gained significant prominence amongst consumers of all ages. Individuals want to stay connected to their digital lives throughout the day. Lucyd’s Bluetooth® enabled glasses facilitate seamless connectivity whilst providing glasses that correct vision and protect the eyes with fashion forward frames at an affordable price. Additionally, the pedestrian accidents and deaths are on the rise partially from distractions caused by mobile devices. Lucyd can help deal with this problem.

Guident owns or holds the exclusive licence to a group of patents that together we believe improve the safety of

autonomous vehicles and land-based autonomous delivery drones. Guident has significantly increased its intellectual

capital in 2019 with several additional patent acquisitions and one in-house developed property. Guident has begun

its B2B marketing program and seeks to develop partnerships with vehicle OEM’s to provide remote tele monitoring

and control centres for autonomous vehicles amongst other services. Such monitoring has recently been required by

law in the State of Florida and other jurisdictions. According to Statista, the US market for Autonomous vehicles is

projected to reach $6 billion by 2025. Tekcapital owns 100% of Guident.

1 https://www.futuremarketinsights.com/reports/sodium-reduction-ingredient-market

2 https://www.statista.com/outlook/12000000/109/eyewear/united-states#market-onlineRevenueShare

Page 8: Tekcapital PLC (Tekcapital, the Company or the Group) · Posting of Annual Report and Accounts The Company's annual report and accounts for the year ended 30 November 2019 will be

Key Investment rationale: Autonomous vehicles and ground based delivery drones are about to make their entrance on the world’s roads. They hold the potential to significantly reduce accidents and transportation costs. We believe that ensuring the safety of these vehicles with software apps for primary use cases including accident remediation coupled with remote monitoring and control centres, will be required for rapid consumer adoption.

Belluscura has developed an improved portable oxygen concentrator to provide on-the-go supplemental O2, with user replaceable filter cartridges. When a patient’s disease progresses, they now can upgrade the filter cartridge to provide more liters of O2 per minute, rather than having to replace an expensive medical device. This cost savings will be beneficial to patients and insurance companies and should help make healthcare more affordable as per Belluscura’s mission. Belluscura raised US $2.7m in 2019 at 15p/share to continue with its FDA clearance and go to market strategy. Post money valuation ~US $9m for the entire business. Belluscura anticipates receiving 510(K) clearance from the US FDA in H1 2020. Upon receipt of clearance from the FDA, the Directors believe that Belluscura’s value should significantly increase. According to Global Market Insights, the medical portable O2 market is currently $1.4bn3 a year and growing by more than $100m/year1. Post end of period, Belluscura has filed an additional patent application (17 patents filed or licensed to-date) entitled “Improved Extracorporeal Membrane Oxygenation Device, System and Related Methods,” covering devices and systems for treating people suffering from acute respiratory distress caused by the Coronavirus. The latest patent application covers devices and systems for treating people suffering from ARDS including patients suffering from the coronavirus. Belluscura and Separation Design are designing and developing next generation, cost-effective, portable ECMO technology to treat ARDS patients. Tekcapital owns 18.9% of Belluscura.

Key Investment rationale: Chronic obstructive pulmonary disease (“COPD”) afflicts more than 250 million individuals worldwide and is growing due to the aging population, smoking and air pollution. Further, as a result of the COVID-19 pandemic, individuals who recover may have residual lung damage. Many of these individuals could benefit from the supplemental oxygen provided by portable oxygen concentrators. Belluscura’s patented approach to enable users to upgrade their portable oxygen concentrators as their disease progresses rather than purchase a new unit will make healthcare more affordable for these patients and their insurance providers.

Corporate

Tekcapital has strengthened the board of directors with the appointments of Lord David Willetts and Mr. Louis Castro.

Rt Hon Lord Willetts FRS is President of the Resolution Foundation and former U.K. Minister for Universities and

Science. He served as the Member of Parliament for Havant (1992-2015), and previously worked at HM Treasury and

the No. 10 Policy Unit. Lord Willetts is a visiting Professor at King’s College London, former Chair of the British Science

Association and a member of the Council of the Institute for Fiscal Studies.

Louis Castro is a highly experienced and well qualified Director and Chartered Accountant with some thirty years spent

in industry and in financial services, including positions as Chief Executive, Finance Director and Non-Executive Director

of several AIM listed companies. He was previously the CFO at Eland Oil & Gas plc where he had full executive

responsibility for finance, legal, corporate finance and a budget of over US$150m. Louis is a Fellow of the Institute of

Chartered Accountants of England & Wales.

We are seeing continued growth of technology transfer services and have released a new version of the Invention

Evaluator tri-lingual website for expansion of its service offerings throughout Latin America. Consulting sales are up

approximately 15% Y-O-Y and currently cover approximately 55% of our administrative costs. One of our goals is to

have all of our administrative costs covered by our service revenue in future periods.

Principal Risks and Uncertainties

The specific financial risks are discussed in the notes to the financial statements. Other risks are as follows:

- the principal financial risks of the business relate to the value of the Group’s portfolio companies. We believe that the fair value of each portfolio company is a time dependent valuation that may be impaired if the business does not achieve it milestones, growth trajectory, product development, capital raises or other key performance metrics. Individually and as a group our portfolio companies have a material impact on our financial performance. This risk of individual portfolio company negative performance may be ameliorated as our portfolio becomes more diverse and increases in value.

3 https://www.gminsights.com/industry-analysis/medical-oxygen-concentrators-market-report

Page 9: Tekcapital PLC (Tekcapital, the Company or the Group) · Posting of Annual Report and Accounts The Company's annual report and accounts for the year ended 30 November 2019 will be

- the principal operational risk of the business is management’s ability to assist our portfolio companies in achieving their goals and ultimate exits whilst increasing our service revenues.

- the Group is dependent on its executive team and directors for its operations and ultimate success and there can be no assurance that it will be able to retain the services of these key personnel in the future.

- the COVID-19 epidemic may produce negative economic activities which could reduce the Group’s economic performance Further, until the Group covers all of its operating costs from service revenue and or exits it will seek to raise additional capital to fund operations and follow-on investments in portfolio companies.

Post Period End Fundraisings

Post end of period, the Company announced that it had completed a fundraising of $0.96 million gross through the

placing of 14,800,000 new ordinary shares with new and existing investors at a price of 5 pence per share. The issue

of the new shares and receipt of the proceeds from the fundraising were received during February 2020.

Post end of period, the Company announced that it had raised US$1.15 million (before expenses) by means of a conditional fundraise through the issue of, in aggregate 9,250,000 placing shares at 10 pence per share. The placing will be subject to Tekcapital’s shareholders approval at a general meeting on 19 May 2020.

Current Trading and Outlook

Having continued to develop and expand Tekcapital’s existing business, the Board is confident that continued

investment in our portfolio companies remains the right approach for long-term value creation. Additionally, we are

currently exploring early stage venture funding for a number of our portfolio companies. Further, we believe that we

are executing on our strategy and this should result in further increases in returns on invested capital as our portfolio

companies continue to mature towards exits.

Whilst it is clear that the Company is progressing very well, net asset values will fluctuate from period to period due

to individual portfolio company performance, valuations and changes in market conditions and macro-economic

financial conditions including the recent Coronavirus epidemic. We are grateful for the patience and support of our

shareholders. We are also sincerely appreciative of our dedicated, creative and incredibly hardworking team without

which, none of the results reported herein would be possible.

Dr Clifford M Gross

Chairman and CEO

05 May 2020

Page 10: Tekcapital PLC (Tekcapital, the Company or the Group) · Posting of Annual Report and Accounts The Company's annual report and accounts for the year ended 30 November 2019 will be

Tekcapital Plc

Consolidated Statement of comprehensive income

For the year ended 30 November 2019

Group

Note

Year ended

30 November 2019

Year ended

30 November 2018

US $ US $

Continuing Operations Revenue from services 6 1,200,551 1,040,830 Unrealised profit on the revaluation of investments

12 6,516,813 5,792,264

Total Revenue 7,717,364 6,833,094

Cost of sales (606,166) (559,630)

Gross Profit 7,111,198 6,273,464

Administrative expenses 7 (1,590,563) (1,717,570)

Operating Profit 5,520,635 4,555,894

Profit on ordinary activities before income tax

5,520,635 4,555,894

Income tax expense 9 (2,345) (1,269)

Profit after tax for the year 5,518,290 4,554,625

Other comprehensive income Foreign exchange (loss)/profit 31,855 (135,342)

Total other comprehensive (loss)/income 31,855 (135,342)

Total comprehensive profit for the year 5,550,145 4,419,283

Profit per share

Basic earnings per share 10 0.095 0.103 Diluted earnings per share 10 0.095 0.103 - -

The Group has used the exemption under S408 CA 2006 not to disclose the Company income statement. Items in the statement above are disclosed net of tax.

Page 11: Tekcapital PLC (Tekcapital, the Company or the Group) · Posting of Annual Report and Accounts The Company's annual report and accounts for the year ended 30 November 2019 will be

Tekcapital Plc Consolidated Statement of financial position At 30 November 2019

Group

Note

As at

30 November 2019

As at

30 November 2018

US $ US $

Assets Non-current assets Intangible assets Financial assets at fair value through profit and loss

13 12

838,770 20,335,925

838,769 13,704,354

Convertible loan notes 15 476,122 250,000 Property, plant and equipment 14 17,353 33,489

21,668,170 14,826,612

Current assets Trade and other receivables 15 815,866 429,373 Cash and cash equivalents 16 472,899 1,165,442

1,288,765 1,594,815

Total assets 22,956,935 16,421,427

Current liabilities Trade and other payables 20 310,160 285,957 Current income tax liabilities Deferred Revenue

500 118,595

500 -

429,255 286,457

Total liabilities 429,255 286,457

Net assets 22,527,680 16,134,970

Equity attributable to the owners of the Parent Ordinary shares 18 372,984 326,036 Share premium 18 10,993,546 10,218,805 Retained earnings 19 11,055,821 5,516,655 Translation Reserve 19 177,498 145,643 Merger Reserve 19 (72,169) (72,169)

Total Equity 22,527,680 16,134,970

Page 12: Tekcapital PLC (Tekcapital, the Company or the Group) · Posting of Annual Report and Accounts The Company's annual report and accounts for the year ended 30 November 2019 will be

Tekcapital Plc Company Statement of financial position At 30 November 2019

Company

Note

As at

30 November 2019

As at

30 November 2018

US $ US $

Assets Non-current assets Intangible assets 13 - - Investment in subsidiaries 11 1,959,003 1,955,013 Financial assets at fair value through profit and loss

12 1,804,120 1,126,315

Convertible Loan Notes 15 476,122 250,000

4,239,245 3,331,328

Current assets Trade and other receivables 15 2,321,731 1,752,385 Cash and cash equivalents 16 112,114 698,694

2,433,845 2,451,079

Total assets 6,673,090 5,782,407

Current Liabilities Trade and other payables 20 484,375 470,808

484,375 470,808

Total liabilities 484,375 470,808

Net assets 6,188,715 5,311,599

Equity attributable to the owners of the parent

Ordinary shares 18 372,984 326,036 Share Premium 18 10,993,546 10,218,805 Retained Earnings 19 (5,079,729) (5,131,273) Translation Reserve 19 (98,086) (101,969)

Total Equity 6,188,715 5,311,599

The Company’s profit before tax for the year ended 30 November 2019 was $30,688.

Page 13: Tekcapital PLC (Tekcapital, the Company or the Group) · Posting of Annual Report and Accounts The Company's annual report and accounts for the year ended 30 November 2019 will be

Tekcapital Plc

Consolidated Statement of changes in equity For the year ended 30 November 2019

Attributable to equity holders of the parent company

Group

Note

Ordinary

Shares

US $

Share

Premium

US $

Translation

Reserve

US $

Merger

reserve

US $

Profit and

loss

account

US $

Total Equity

US $

Balance at 30 November 2017 264,221 9,271,098 280,985 (72,169) 931,826 10,675,961

Share issue 18 61,815 1,097,216 1,159,031

Cost of share issue 18 - (149,509) - - - (149,509)

Profit for the year 19 - - - - 4,554,625 4,554,625

Other comprehensive income 19 - - (135,342) - - (135,342)

Share based payments 26 - - - - 30,204 30,204

Balance at 30 November 2018 326,036 10,218,805 145,643 (72,169) 5,516,655 16,134,970

Share issue 18 46,948 892,018 938,966

Cost of share issue 18 - (117,277) - - - (117,277)

Profit for the year 19 - - - - 5,518,290 5,518,290

Other comprehensive income 19 - - 31,855 - - 31,855

Share based payments 26 - - - - 20,876 20,876

Balance at 30 November 2019 372,984 10,993,546 177,498 (72,169) 11,055,821 22,527,680

Share premium – amount subscribed for share capital in excess of nominal value, net of directly attributable costs.

Translation reserve – amount subscribed for foreign exchange differences recognised in Other Comprehensive Income.

Merger reserve - amount subscribed for share capital in excess of nominal value in relation to the qualifying acquisition of subsidiary undertakings.

Profit and loss account – cumulative net gains and losses recognised in the consolidated statement of comprehensive income.

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Tekcapital PLC

Company Statement of changes in equity For the year ended 30 November 2019 Attributable to owners of the parent company

Company

Note

Ordinary

Shares

US $

Share

Premium

US $

Translation

Reserve

US $

Retained

earnings

US $

Total Equity

US $

Balance at 30 November 2017 264,221 9,271,098 77,277 (4,241,264) 5,371,332

Share issue 18 61,815 1,097,216 - - 1,159,031

Cost of share issue 18 - (149,509) - - (149,509)

Profit for the year 19 - - - (920,213) (920,213)

Other comprehensive income 19 - - (179,246) - (179,246)

Share based payments 26 - - - 30,204 30,204

Balance at 30 November 2018 326,036 10,218,805 (101,969) (5,131,273) 5,311,599

Share issue 18 46,948 892,018 - - 938,966

Cost of share issue 18 - (117,277) - - (117,277)

Profit for the year 19 - - - 30,668 30,668

Other comprehensive loss 19 - - 3,883 - 3,883

Share based payments 26 - - - 20,876 20,876

Balance at 30 November 2019 372,984 10,993,546 (98,086) (5,079,729) 6,188,715

Share premium – amount subscribed for share capital in excess of nominal value, net of directly attributable issue costs.

Translation reserve – amount subscribed for foreign exchange differences recognized in Other Comprehensive Income.

Profit and loss account – cumulative net gains and losses recognised in the consolidated financial statements of comprehensive income.

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Tekcapital Plc Consolidated Statement of cash flows For the year ended 30 November 2019

Group

Note

For the year ended

30 November 2019

For the year ended

30 November 2018

US $ US $

Cash flows from operating activities Cash outflows from operations 24 (1,397,294) (866,377) Tax paid (2,345) (1,269)

Net cash outflows from operating activities

(1,399,639) (867,646)

Cash flows from investing activities

Purchase of financial assets at fair value through profit and loss*

12 (111,810) (693,413)

Purchases of property, plant and equipment

14 (862) (45,841)

Proceeds from sale of property, plant and equipment

- 80

Net cash outflows from investing activities

(112,672) (739,174)

Cash flows from financing activities Proceeds from issuance of ordinary shares

18 938,966 1,159,031

Costs of raising finance 18 (117,277) (149,508)

Net cash outflows from financing activities

821,689 1,009,523

Net (decrease) in cash and cash equivalents

(690,622) (597,297)

Cash and cash equivalents at beginning of year

15 1,165,442 1,797,729

Exchange (losses)/gains on cash and cash equivalents

(1,921) (34,990)

Cash and cash equivalents at end of year 15 472,899 1,165,442

* No significant non-cash transaction occurred during the period.

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Notes 1. General Information

Tekcapital PLC is a company incorporated in England and Wales and domiciled in the UK. The address of the registered office is detailed on page 1 of these financial statements. The Company is a public limited company, which listed on the AIM market of the London Stock Exchange in 2014. The principal activity of the parent company is that of an investment entity and that of the Group is to provide universities and corporate clients with a wide range of technology transfer services. The Group and the parent company also acquire exclusive licences for disruptive technologies it has acquired for its own portfolio, for subsequent commercialisation. The principal accounting policies applied in the preparation of these consolidated and parent company financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. Amounts presented in this report are rounded to nearest US$1.

2. Accounting policies

2.1 Statement of compliance The consolidated financial statements of Tekcapital PLC Group have been prepared in accordance with International Financial Reporting Standards (IFRS) and IFRS Interpretations Committee (IFRS IC) as adopted by the European Union and the Companies Act 2006 applicable to companies reporting under IFRS. The consolidated financial statements have been prepared under the historical cost convention. The consolidated financial statements comprise the financial statements of Tekcapital plc and its subsidiaries, Tekcapital Europe Ltd and Tekcapital LLC. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 4. The consolidated financial statements of the parent company have been prepared in accordance with Financial Reporting Standard 101 “Reduced disclosure framework” (‘FRS 101’). The company will continue to prepare its financial statements in accordance with FRS101 on an ongoing basis until such time as it notifies shareholders of any change to its chosen accounting framework. The Company financial statements have been prepared using the historical cost convention except where other measurement basis are required to be applied and in accordance with IFRS under FRS 101. In accordance with FRS101, the company has taken advantage of the following exemptions:

• IAS 7, ‘Statement of Cash Flows’ • Requirements of IAS 24, ‘Related Party Disclosures’ to disclose related party transactions entered into

between two or more members of a group.

2.1.1 Going concern The Group and the Company meets its day to day working capital requirements through its service offerings and monies raised through the issues of equity. The Group’s forecasts and projections indicate that the Group and the Company have sufficient cash reserves to operate within the level of its current facilities. Whilst it is the Group’s and the Company’s intention to rely on the available cash reserves, future income generated from its growing service offerings and reductions in its cost base, a negative variance in the forecasts and projections would make the Group’s ability to continue as a going concern dependent on an additional fund raise. If the Group’s forecasts are not achieved, the Directors would seek to raise the additional funds through equity issues. Whilst the COVID-19 epidemic is contributing to uncertainty in the markets and the full impact is difficult to measure, at the time of approving the accounts after making enquiries, the Directors have a reasonable expectation that the Group and the Company have adequate resources to continue in operational existence for

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the foreseeable future. The Group and the Company therefore continue to adopt the going concern basis in preparing both its consolidated financial statements and for its own financial statements.

2.1.2 Changes in accounting policy and disclosures

New standards and interpretations not yet adopted by the Group

IFRS 16 Leases IFRS 16 was issued in January 2016 and is effective for accounting periods beginning on or after 1 January 2019. The Group has not chosen to early adopt this standard and will adopt it for the accounting period beginning 1 December 2019. Directors do not expect any material impact on the consolidated financial statements, as most of its operating lease commitment disclosed in Note 25 (US$61,925) will be satisfied by 1 December 2019. No other issued but not endorsed amendments to IFRS will have a material impact on the Group’s financial statements once they become endorsed and effective. New standards and interpretations adopted by the Group: IFRS 9 IFRS 9 was issued in July 2014 and is effective for accounting periods on or after 1 January 2018. The Group has adopted the full retrospective method of adoption; however, the adoption of this standard has not had an impact on the financial performance or position of the Group for the year or comparative period. IFRS 15 Revenue from contracts with customers IFRS 15 was issued in September 2015 and is effective for accounting periods beginning on or after 1 January 2018. The Group has adopted IFRS 15 on 1 December 2018, effectively replacing IAS 18 used by the Group previously. The Group has adopted the full retrospective method of adoption; however, the adoption of this standard has not had an impact on the financial performance or position of the Group for the year or comparative period. Additional disclosures were included in Note 6 to satisfy the IFRS disclosure requirements.

2.2 Business combinations Tekcapital PLC was incorporated on 3 February 2014 and on 18 February 2014 entered into an agreement to acquire the issued share capital of Tekcapital Europe Limited by way of share issue. On 19 February 2014 it acquired the issued share capital of Tekcapital LLC also by share issue. This has been accounted for as a common control transaction under IFRS 3 using the pooling of interest method by using the nominal value of shares exchanged in the business combination and no fair value adjustment. The consolidated financial statements comprise the financial statements of Tekcapital PLC and all subsidiaries controlled by it. Subsidiaries are entities that are controlled by the Group. Control is achieved when the Group has the power to govern the financial and operating policies of an entity so as to obtain economic benefit from its activities. Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated when necessary amounts reported by subsidiaries have been adjusted to conform to the Group’s accounting policies.

2.3 Foreign currencies

(a) Functional and presentation currency These consolidated financial statements are presented in US Dollars which is the presentation currency of the Group. This is because the majority of the Group’s transactions are undertaken in US Dollars. Each subsidiary within the Group has its own functional currency which is dependent on the primary economic environment in

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which that subsidiary operates. Effective 1 December 2014 Tekcapital PLC and Tekcapital Europe Limited changed their functional currency to UK Sterling. This is because, the primary economic activity of these entities is undertaken in the UK.

(b) Transactions and balances Foreign currency transactions are translated into functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are re-measured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at the year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the income statement within ‘finance income or costs’. (c) Group companies The results and financial position of all Group entities (none of which has the currency of a hyper-inflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

(i) assets and liabilities for each balance sheet presented are translated at the closing exchange rates at

the date of that balance sheet. (ii) income and expense for each income statement are translated at the average rates of exchange during

the period (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions)

(iii) all resulting exchange differences are recognised in other comprehensive income.

2.4 Investment in subsidiaries

Investments in subsidiaries including Tekcapital Europe Ltd and Tekcapital LLC are recognised initially at cost.

The cost of the investment includes transactions costs. The carrying amounts are reviewed at each reporting

dated to determine whether there is any indication of impairment.

Investments in portfolio companies are held at fair value through the profit and loss. Directors’ judgment was

exercised in determination that the Group meets the following criteria and should be recognized as an

investment entity under IFRS 10 par. 27. Directors re-evaluated the below criteria and concluded they were met

as at 30 November 2019:

• Obtains funds from one or more investors for the purpose of providing clients with investment management

services

• Commits to its investors that its business purpose is to invest funds solely for return from capital appreciation,

investment income or both

• Measures and evaluate the performance of substantially all of its investments on a fair value basis.

Tekcapital’s IP search and technology transfer investment services represent investment advisory services, and

therefore Tekcapital Europe Limited and Tekcapital LLC continue to be treated as subsidiaries and are

consolidated in the Group financial statements. These services may be provided to investors, clients and third

parties. The Board considers that the criteria are met in the group’s current circumstances.

The Board envisages that Tekcapital’s shareholder returns will derive primarily from mid to long-term capital

appreciation of a portion of its intellectual property investments, as well as from providing IP investment services

to clients. Consequently, the Group’s portfolio companies are measured at fair value in accordance with IFRS 9

as disclosed in Note 2.9.

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2.5 Non-controlling interests

Losses applicable to non-controlling interests in a subsidiary are allocated to the non-controlling interests, even

if doing so causes the non-controlling interests to have a deficit balance. Adjustments to non-controlling

interests arising from transactions that do not involve the loss of control are based on a proportionate amount

of the net assets of the subsidiary. Upon the loss of control the assets and liabilities of the subsidiary, any non-

controlling interests and other components of equity related to the subsidiary are derecognised. Any resulting

gain or loss is recognised in the profit and loss.

2.6 Property, plant and equipment

Property, plant and equipment is stated at historical cost less accumulated depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Depreciation of assets are calculated to write off the cost less the estimated residual value of tangible fixed assets by equal instalments over the estimated useful economic lives as follows: Furniture - 3 years Computer equipment - 3 years Leasehold improvements - 5 years The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the assets carrying value is greater than its estimated recoverable amount. Gains and losses on disposals are determined by comparing proceeds with the carrying amount and are recognised within ‘Other gains / (losses) – net’ in the income statement. When re-valued assets are sold, the amounts are included in other reserves are transferred to retained earnings.

2.7 Intangible assets

(a) Invention Evaluator This is an intangible asset and a piece of computer software acquired for use by one of the subsidiaries of the Group and is shown at original cost of purchase less impairment losses. Under IAS38, this asset is regarded by the Directors as being an intangible asset with an indefinite useful life. The Directors believe that the asset is unique in that no competitor offering currently exists, the service appeals globally to many types of clients including Fortune 100 companies, there is no expectation of obsolescence in the foreseeable future, and the service provided by the asset generates sufficient ongoing revenue streams. Consequently, no write down in the value of this asset either by way of amortisation or impairment has occurred in this financial year. In the Directors’ opinion this asset has an indefinite useful life. (b) Computer software and website development Costs associated with maintaining computer software programmes and the Company website are recognised as an expense as incurred. Development costs that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognised as intangible assets when the following criteria are met: (i) it is technically feasible to complete the software product so that it will be available for use; (ii) management intends to complete the software product and use or sell it;

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(iii) there is an ability to use or sell the software product; (iv) it can be demonstrated how the software product will generate probable future economic benefits; (v) adequate technical, financial and other resources to complete the development and to use or sell the software product are available; and (vi) the expenditure attributable to the software product during its development can be reliably measured. Computer software development costs recognised as assets are amortised over their estimated useful lives, which do not exceed four years.

(c) Licences Costs associated with the acquisition of Licences for technologies with the express purpose of developing them further for a commercial market are recognised as an intangible asset when they meet the criteria for capitalisation. That is, they are separately identifiable and measurable and it is probable that economic benefit will flow to the entity. Further development costs attributable to the Licenced technology and recognised as an intangible asset when the following criteria are met:

(i) it is technically feasible to complete the technology for commercialisation so that it will be available for use;

(ii) management intends to complete the technology and use or sell it; (iii) there is an ability to use or sell the technology; (iv) it can be demonstrated how the technology will generate probable future economic benefits; (v) adequate technical, financial and other resources to complete the development and to use or sell the

technology are available; and (vi) the expenditure attributable to the technology during its development can be reliably measured.

Licences and their associated development costs are amortised over the life of the licence or the underlying patents, whichever is shorter.

(d) Vortechs Group This is an intangible asset acquired for use by one of the subsidiaries of the Group and is valued at original cost of purchase. Under IAS38, the Group’s Vortechs Group asset is regarded by the Directors as being an intangible asset with an indefinite useful life. The Directors believe that this asset is unique as it operates in a niche market, it generates an ongoing revenue stream, and there is no expectation of obsolescence. This asset meets the requirements of IAS38 as it is separately identifiable, controlled by the Group, the cost can be measured reliably, and as a result of owning this asset future economic benefits in the form of service revenue are generated for the Group. In the opinion of the Directors this asset as an indefinite useful life and there has been no amortisation or impairment provided in the current year.

2.8 Impairment of non-financial assets Intangible assets that have an indefinite useful life or intangible assets not ready to use are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying value exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are largely independent cash inflows, (CGUs). Prior impairments of non-financial assets (other than goodwill) are reviewed for possible reversal at each reporting date.

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2.9 Financial assets

2.9.1 Classification The Group and the Company classify their financial assets depending on the purpose for which the asset was acquired. Management determines the classification of its financial assets at initial recognition. During the financial year the Group and the Company held investments into portfolio companies classified as equity investments. They are included in current assets and are measured at fair value through profit and loss in accordance with IFRS 9. The Company also has loans, convertible loan notes and receivables that are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities that are greater than 12 months after the end of the reporting year. These are classified as non-current assets. The Group’s loans and receivables comprise ‘trade and other receivables’ in the balance sheet. The Group also has cash and cash equivalents. All short-term liabilities are measured at cost, the Group does not hold any long-term financial liabilities.

2.9.2 Recognition and measurement

The Company’s investments into the portfolio companies are recognised on the acquisition or formation date and measured at fair value through profit or loss in accordance with IFRS 9. Loans and receivables are recognised on the trade date in which the transaction took place and are recognised at their fair value (which equates to cost) with transaction costs expensed in the income statement. Financial assets are derecognised when the rights to receive cash flows from the loans or receivables have been collected, expired or transferred and the Group has subsequently transferred substantially all risks and rewards of ownership. Short term financial liabilities are initially measured at fair value and subsequently measured at amortised cost using the effective interest rate method.

2.9.3 Fair value

Financial instruments are measured at fair value including investments in portfolio companies, cash and cash equivalents, trade and other receivables, trade and other payables, and borrowings. This measurement policy does not apply to subsequent measurement at amortised cost of short-term financial liabilities and trade receivables. The Group measures portfolio companies using valuation techniques appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. Our fair value valuation policy is as follows:

• The fair value of new portfolio companies is estimated at the cost of the acquired IP or equity plus associated expenses to facilitate the acquisition.

• Existing portfolio companies are valued as follows: ➢ If a market transaction such as third-party funding has occurred during the past 18 months we will value

our ownership in the portfolio company at this observed valuation, taking account of any observed material changes during the period.

➢ In the absence of a recent market transaction, fair value will be estimated by alternative methods and where appropriate by an external, qualified valuation expert. The valuation technique used fall under Level 2 – Observable techniques other than quoted prices and Level 3 – other techniques as defined by IFRS 13.

Due to their short-term nature, the carrying value of cash and cash equivalents, trade and other receivables, and trade and other payables approximate their fair value. The fair value of borrowings equals their carrying amounts, as the impact of discounts is not significant.

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2.10 Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is the intention to settle on a net basis or realise the asset and settle the liability simultaneously.

2.11 Impairment of financial assets

The Group assesses at the end of each reporting year whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that have occurred after the initial recognition of the asset (a ‘loss event’) and the loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtors or a group of debtors is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation, and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. For the loans and receivables category, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the consolidated income statement. If a loan or held-to maturity investment has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. As a practical expedient, the Group may measure impairment on the basis of an instrument’s fair value using an observable market price. If, in a subsequent year, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as the improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in the consolidated income statement.

2.12 Trade receivables

Trade receivables are amounts due from customers for the provision of services performed in the ordinary course of business. Collection is normally expected within three months or less (in the normal operating cycle of the business) and is classified as current assets. In the rare circumstances that they exceed a period of greater than one year they are presented as non-current assets. In some instances, the Group accepts convertible loan notes for trade debts these are held separately on the statement of financial position until maturity or disposal on the open market. Any value received which is greater or less than the value of the original debt is taken to the consolidated statement of comprehensive income. Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment.

2.13 Cash and cash equivalents

In the consolidated statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call with other banks, other short term highly liquid investments with maturities of three months or less and bank overdrafts. In the consolidated statement of financial position, bank overdrafts are shown within borrowings in current liabilities.

2.14 Share capital Ordinary Shares Ordinary shares are classified as equity.

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Share premium The share premium account has been established to represent the excess of proceeds over the nominal value for all share issues, including the excess of the exercise share price over the nominal value of the shares on the exercise of share options as and when they occur. Incremental costs directly attributable to the issue of new ordinary shares and new shares options are shown in equity as a deduction, net of tax, from the proceeds. Merger Reserve The consolidated financial statements are accounted for using the ‘pooling of interests’ method’, which treats the Group as if it had been combined throughout the current and comparative accounting periods. Pooling of interests principles for this combination gave rise to a merger reserve in the consolidated statement of financial position, being the difference between the nominal value of new shares issued by the Company for the acquisition of the shares of the subsidiary and the subsidiary’s own share capital. Non-controlling interest Non-controlling interest is the portion of equity ownership in a subsidiary not attributable to the parent company.

2.15 Trade payables

Trade payables are obligations to pay for goods and services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less (or in the normal operating cycle of business if longer). If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method.

2.16 Share based payments

The Group operates a number of equity-settled, share-based compensation plans, under which the entity receives services from employees as consideration for equity instruments (options) of the Group. The fair value of the employee services received in exchange for the grant of options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted:

• including any market performance conditions;

• excluding the impact of any service and non-market performance vesting conditions (for example, profitability, sales growth targets and remaining an employee of the entity over a specified time period); and

• excluding the impact of any non-vesting conditions (for example the requirement of the employees to save).

Assumptions about the number of options that are expected to vest include consideration of non-market vesting conditions. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each reporting period, the entity revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to the originally estimates, if any, in the income statement, with a corresponding adjustment to equity. When the options are exercised, the Group issues new shares. The proceeds received net of any directly attributable transactions costs are credited to share capital (nominal value) and share premium when the options are exercised.

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2.17 Current and deferred tax The tax expense for the year comprises current and deferred tax. Tax is recognised in the consolidated income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. The current income tax charge is calculated on the basis of tax laws enacted or substantively enacted at the balance sheet date in the countries where the Company and its subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is recognised on temporary timing differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets are recognised on deductible temporary differences arising from investments in subsidiaries only to the extent that it is probable the temporary difference will reverse in full in the future and there is sufficient taxable profit available against which the temporary difference can be utilised. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle balances on a net basis.

2.18 Provisions

Provisions and any other anticipated foreseen liabilities are recognised: when the Group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Restructuring provisions comprise lease termination penalties, and employee termination payments. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering a class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as an interest expense.

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2.19 Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Rentals payable under the operating leases are charged to income on a straight-line basis over the term of the relevant lease.

2.20 Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable, and represents amounts receivable for the services supplied, stated net of discounts, and value added taxes. The Group recognises revenue when the contract is identified, performance obligation is determined, transaction price is determined and allocated to performance obligation in accordance with IFRS 15. The Group also recognises an unrealised profit/loss on the revaluation of investments in share of portfolio companies in accordance with the fair value policy outlined in Note 2.9. Provision of services The Group provides following lines of services: - Invention Evaluator services: provision of reports assessing potential of any new technology. Revenue is recognized upon delivery of a complete report - IP Acquisition Opportunities services: provision of reports identifying attractive university developed IP. Revenue is recognised upon delivery of a complete report - Tech transfer recruitment services: recruitment services specialising in technology transfer executives. Revenue is recognised when the placement is successfully completed - Training services: custom solutions for new tech transfer offices, spin out companies and accelerators delivered via in person trainings. Revenue is recognised over time based on completion stage of each session. Interest income Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.

3. Financial Risk Management 3.1 Financial risk factors

(a) Portfolio Risk/Investments Risk Management Investment into portfolio companies held by the Group requires long-term commitment with no certainty of return. The fair value of each portfolio company represents the best estimate at a point in time and may be impaired if the business does not perform as well as expected, directly impacting the Group’s value and profitability. This risk is mitigated as the size of the portfolio increases. The Group performed sensitivity analysis with regards to assumptions used in determination of fair value of the portfolio in Note 12. The Group also regularly monitors portfolio companies’ liquidity required for returns to occur.

(b) Credit Risk Credit risk is managed on a Group basis. In order to minimise this risk, the Group endeavours to only deal with companies that are demonstrable creditworthy, and the Directors continuously monitor the exposure. The Group’s maximum exposure to credit risk for the components of financial position at 30 November 2019 and 2018 is the carrying amount of its current trade and other receivables as illustrated in Note 15. The Group monitors credit risk related to performance of portfolio companies, including considerations related to recoverability of convertible loan notes issued. Progress is monitored and regular discussions are held with

Page 26: Tekcapital PLC (Tekcapital, the Company or the Group) · Posting of Annual Report and Accounts The Company's annual report and accounts for the year ended 30 November 2019 will be

management of portfolio companies to assess commercial progress and financial information provided. The Group also monitors credit risk related to creditor amounts due from portfolio companies. (c) Liquidity Risk Management

Cash flow forecasting is performed on a Group basis. The Directors monitor rolling forecasts of the Group’s

liquidity requirements to ensure it has sufficient cash to meet operational needs. At the reporting date the Group held bank balances of US $472,899. Post period end, the Group completed a post period end placement for US$0.9m and a conditional placing for US$1.15m. All amounts shown in the consolidated statement of financial position under current assets and current liabilities mature for payment within one year, with Trade and Other Receivables exceeding Trade and Other Payables by US$ 505,706.

(d) Financial Risk Management

The Company’s Directors review the financial risk of the Group. Due to the early stage of its operations the Group

has not entered into any form of financial instruments to assist in the management of risk during the period under review.

(e) Market Risk Management

Due to low value and number of financial transactions that involve foreign currency and the fact that the Group

has no borrowings to manage, the Directors have not entered into any arrangements, adopted or approved the use of derivative financial instruments to assist in the management of the exposure of these risks. It is their view that any exchange risks on such transactions are negligible.

The Group also regularly monitors risk related to fair value of financial instruments held such as convertible loan

notes held. (f) Foreign exchange risk

Foreign exchange risk arises when individual Group entities enter into transactions denominated in a currency other than their functional currency. The Group’s policy is, where possible, to allow Group entities to settle liabilities denominated in their functional currency, with the cash generated from their own operations in that currency. Where Group entities have liabilities denominated in a currency other than their functional currency (and have insufficient reserves of that currency to settle them), cash already denominated in that currency will, where possible, be transferred from elsewhere within the Group.

A sensitivity analysis has been performed to assess the exposure of the Group to foreign exchange movements.

If the exchange rate weakened by 10 percent then the effect on the gain before tax would decrease by US$33,177 and equity would decrease by US$37,788.

(g) Impact of the COVID-19 pandemic

The current Coronavirus epidemic may produce negative economic activities which could reduce the company’s economic performance and the performance of its portfolio companies in ways that are difficult to quantify at this juncture. It may cause a recession in the markets in which the Group operates, reduce the Group’s net asset values, revenue, cash flow, access to investment capital and other factors which could negatively impact the Group.

3.2 Capital management The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern

in order to provide returns for shareholders, benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

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In order to adjust or maintain the capital structure, the Group may adjust the level of dividends paid to its shareholders, return capital to shareholders, issue new shares or sell assets to reduce borrowings. The Group has no external borrowings. This policy is periodically reviewed by the Directors, and the Group’s strategy remains unchanged for the foreseeable future.

The capital structure of the Group consists of cash and bank balances and equity consisting of issued share

capital, reserves and retained losses of the Group. The Directors regularly review the capital structure of the Company and consider the cost of capital and the associated risks with each class of capital. The Company has no external borrowings and this has no impact on the gearing levels of the Group as at 30 November 2019.

The Company’s historic cost of capital has been the cost of securing equity financings, which have averaged

around 10%. The company’s long-term financial goal is to optimise its returns on invested capital (ROIC) in excess of our weighted average cost of capital (WACC) and as such create value for our shareholders. The method the Company seeks to employ for achieving this is to utilise its structural intellectual capital developed through its Discovery Search Network, its Invention Evaluator service and its Vortechs Group Service to mitigate selection bias and improve returns on invested capital. Ultimately, management will seek to monetize these returns with exits from its investments in portfolio companies.

4. Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Directors made the following judgements: - determination as to the classification of the Group as an investment entity as discussed in Note 2.4 - determination of operating segments as disclosed in Note 5 - determination of reliance of the Group’s portfolio companies on funding to achieve their fair values discussed in Note 12. The Directors also make estimates and assumptions concerning the future. The resulting accounting estimates will by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying value of the assets and liabilities within the next financial year are detailed below.

Key

estimate/judgment

area

Key assumption Potential

impact

within the

next

financial

year

Potential

impact in

the

longer

term

Note reference

for sensitivity

analysis

Valuation of

unquoted equity

investments

In applying valuation techniques to

determine the fair value of unquoted

equity investments the Group and the

Company make estimates and

assumptions regarding the future

potential of the investments. The policy of

the Group and the Company is to value

new portfolio companies at cost of the

acquired IP or equity plus associated

expenses to facilitate the acquisition.

Existing portfolio companies are valued

using either a market transaction such as

third-party funding or, in the absence of a

recent market transaction, by alternative

✓ ✓ Note 12

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methods and where appropriate by an

external, qualified valuation expert.

The fair value of Guident Limited reflects

the fair value of the Guident’s net assets.

This value is primarily based on its IP

portfolio detailed in Note 12, valued using

the royalty relief method. The estimates

used in this valuation include market size

market penetration used to determine

projected sales, the royalty relief rate and

the discount factor. These estimates are

key to calculation of the net present value

of future cashflows associated with the

patent. The fair value calculation assumes

Guident Limited obtains sufficient funding

to execute their strategy.

The fair value of Salarius Limited reflects

the fair value of the Salarius’ net assets.

This value is primarily based on the US

patent 8,900,650 valued using the royalty

relief method. The estimates used in this

valuation include market size market

penetration used to determine projected

sales, the royalty relief rate and the

discount factor. These estimates are key

to calculation of the net present value of

future cashflows associated with the

patent. The fair value calculation assumes

Salarius Limited obtains sufficient funding

to execute their strategy.

The fair value of Lucyd Limited reflects:

- Lucyd’s ecommerce platform valued by

estimating the net present value of future

cashflows associated with the e-shop. Key

assumptions used in estimating future

cash flows are projected profits including

market size and market penetration used

to determine projected sales, and a

discount factor applied for the net present

value of future cashflows from the

platform.

- Lucyd’s trademark value based on the

Net book value stated at cost.

Useful life of

Invention

Evaluator website

The Directors have considered the useful life of the Invention Evaluator website to be indefinite because of the uniqueness of the service it provides and that there is no competitor in the market in which the Group operates who is able to provide a similar service. The Directors undertake

✓ ✓ Note 13

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an annual review that considers an appropriateness of the use of an indefinite useful life in addition to impairment review and if required make a provision in the financial statements.

Useful life of Vortechs Group

The Directors have considered the useful life of Vortechs Group to be indefinite because of the ongoing service revenue that is being generated. The business operates in a specialised market, with few competitors. The Directors undertake an annual review that considers an appropriateness of the use of an indefinite useful life in addition to impairment review and if required make a provision in the financial statements.

✓ ✓ Note 13

Deferred Taxes

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised based on tax laws and rates that have been enacted or substantively enacted at the balance sheet date. The Group did not recognize deferred tax liability on fair value gains associated with the revaluation of shares in its portfolio companies due to availability of the substantial shareholdings exemption. This is considered a permanent difference and not a temporary difference.

✓ ✓ Note 22

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5. Segmental reporting The Directors consider the business to have three segments for reporting purposes under IFRS 8 which are:

• professional services, including the provision of recruitment services via Vortechs Group, provision of reports and services provided to locate and transfer technologies to customers, as well as R&D tax relief credits and provision of management services to its portfolio companies. The activities grouped under this segment share similar economic characteristics of provision of intellectual property services to third party services;

• licensing and investment activities, including acquiring licences for technologies, portfolio company investment, development and commercialisation. The activities share the goal of increasing the fair value of investments made into portfolio companies by the Group.

Segmental revenues and results

2019

Consolidated income statement

Professional

Services

US $

Licensing &

Investment

US $

TOTAL

US $

Net Revenue 1,170,733 6,516,813 7,687,546

Interest Income

Cost of Sales (606,166)

29,818 29,818

(606,166)

Administrative Expenses (503,840) (1,069,725) (1,573,565)

Depreciation and Amortisation (4,249) (12,749) (16,998)

Group operating profit 56,478 5,464,157 5,520,635

Profit on ordinary activities before

income tax 56,478 5,464,157 5,520,635

Profit tax expense (586) (1,759) (2,345)

Profit after tax 55,892 5,462,398 5,518,290

2018

Consolidated income statement

Professional

Services

US $

Licensing &

Investment

US $

TOTAL

US $

Net revenue 1,040,830 5,792,264 6,833,094

Cost of sales (559,630) - (559,630)

Administrative expenses (629,483) (1,070,017) (1,699,500)

Depreciation and amortisation (4,517) (13,553) (18,070)

Group operating profit/(loss) (152,800) 4,708,694 4,555,894

Profit/(Loss) on ordinary activities

before income tax (152,800) 4,708,694 4,555,894

Income tax expense (317) (952) (1,269)

Profit/(Loss) after tax (153,117) 4,707,742 4,554,625

Segment assets and liabilities

2019 Consolidated statement of financial position

Professional Services US $

Licensing and Investment US $

TOTAL US $

Assets 1,614,014 21,342,921 22,956,935

Liabilities (429,255) (429,255)

Net assets 1,184,759 21,342,921 22,527,680

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2018 Consolidated statement of financial position

Professional Services US $

Licensing Activities US $

Other US $

TOTAL US $

Assets 1,901,195 14,386,512 133,720 16,421,427 Liabilities (214,842) (42,969) (28,646) (286,457)

Net assets 1,686,353 14,343,543 (105,074) 16,134,970

Geographical information

2019 US $

2018 US $

United Kingdom 6,516,813 6,068,109 United States 1,200,551 764,985

Total revenue 7,717,364 6,833,094

Geographical information

2019 US $

2018 US $

United Kingdom Assets

21,342,921

14,386,512

Liabilities United States Assets Liabilities

- 1,614,014 (429,255)

(42,969) 2,034,915 (243,488)

Total Net Assets 22,527,680 16,134,970

The Group’s operations are now strictly divided between those of professional services or licensing and investment, therefore no amounts are presented under “Other” compared to previous years.

6. Revenue from Services The below table discloses disaggregated Revenue from “Services by their nature/categories as well as timing

of the revenue. Please refer to Note 12 for disaggregation of Group’s Unrealized profit on the revaluation of investments.

Page 32: Tekcapital PLC (Tekcapital, the Company or the Group) · Posting of Annual Report and Accounts The Company's annual report and accounts for the year ended 30 November 2019 will be

Group Transferred at a point in time

Transferred over time

Total 2019 US$

Transferred at a point in time

Transferred over time

Total 2018 US$

Major service lines: Sales of Invention Evaluator Tech transfer recruitment services Technology reports Training services Management services R & D relief income* Loan convertible interest income Other

199,184 454,452 45,800 - - - - -

- - - - 413,278 58,019 29,818 -

199,184 454,452 45,800 - - 413,278 58,019 29,818 -

247,593 381,380 44,000 - - - - - -

- - - 90,000 181,474 94,371 - 2,012

247,593 381,380 44,000 90,000 181,474 94,371 - 2,012

Total Revenue from Services 699,436 501,115 1,200,551 672,973 367,857 1,040,830

* The Group received an R&D tax relief, the directors consider this to be income. All of the Group’s major service lines are sold directly to consumers and not through intermediaries. All revenue recognised in the reporting period represent performance obligations satisfied in the current period.

7. Expenses 7.1 Expenses by nature

Group 2019 US $

2018

US $

Depreciation of property plant and equipment

16,998 18,070

Research and development expenses 173,947 204,968 Other administration expenses 1,463,289 1,564,320 Foreign exchange movements (63,671) (69,788)

Total expenses 1,590,563 1,717,570

Included in the Other administration expenses is the amount of US$ 65,848 related to payments under operating lease for the office rental agreement also referenced in Note 25.

7.2 Auditor remuneration

Group 2019 US $

2018 US $

Fees payable to the Group’s auditor and its associated for the audit of the Group and Company financial statements

95,313 77,912 Fees payable to the Company’s auditor and its associates for other

• The audit of company’s subsidiaries 15,920 16,277

111,233 94,189

Page 33: Tekcapital PLC (Tekcapital, the Company or the Group) · Posting of Annual Report and Accounts The Company's annual report and accounts for the year ended 30 November 2019 will be

8. Employees 8.1 Directors’ emoluments

Group 2019

US $ 2018 US $

Directors emoluments 264,799 264,938

Total 264,799 264,938

The highest paid Director received a salary of $187,760 (2018: $191,865) and benefits of $21,050 (2018: $15,253). The highest paid Director received a bonus of $0 (2018: $0). The highest paid Director did not exercise any share options or receive any shares from the Company during the current year. No termination benefits, post-employment benefits were provided to Directors. Total of short-term benefits in kind of US$21,050 were provided during the year. The amounts in the table above do not include Employers NI in the amount of US$14,447. Key management personnel (including Directors and Group Financial Controller) received salary of US$368,042, excluding Stock Base Compensation disclosed in Directors Remuneration Report. Please also refer to Director’s Report.

8.2 Employee benefit expense

Group 2019 US $

2018 US $

Wages and salaries including restructuring costs and other termination benefits

275,765 296,751

Social security costs 40,644 43,453 Share options granted to directors and employees 20,876 32,775

Total 337,285 372,979

8.3 Average number of people employed

Group 2019

2018

Average number of people (including executive directors) employed

Operations 4 4 Management 2 2

Total average headcount 6 6

Average number of employees with the Company in 2019 and 2019 was two (Management). To enhance flexibility and improve cost control, the Group utilizes consultants for scientific review, administrative and operations support, software development and other knowledge-intensive services.

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9. Income tax expense

Group 2019 US $

2018 US $

Current tax Current tax on profits for the year 2,345 1,269

Total current tax 2,345 1,269

Income tax expense 2,345 1,269

Group 2019

US $ 2018 US $

Profit before tax 5,520,635 4,555,894

Tax calculated at domestic tax rates applicable to profits

1,048,921 774,502

Tax effects of:

• Expenses not deductible for tax purposes 19,155 15,444

• Income not taxable (1,238,195) (1,057,017)

• Capital allowances in excess of depreciation 3,230 2,150

• Unrelieved tax losses and other deductions 169,235 266,190

Total corporation tax 2,345 1,269

The weighted average applicable tax rate was 19% (2018: 17%). The Group applied 17% tax rate in FY 2018 based on expectation of corporation tax rate adjustment that did not materialise. Unused tax losses for which no deferred tax assets have been recognised is attributable to the uncertainty over the recoverability of those losses through future profits.

10. Earnings per share Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of Ordinary Shares outstanding during the period. Diluted earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the

sum of weighted average number of (1) Ordinary Shares outstanding during the period and (2) any dilutive

potential Ordinary Shares outstanding at 30 November 2019.

2019 2018 Earnings attributable to equity holders of the Group (US$)

5,518,290 4,554,625

Weighted average number of Ordinary Shares in issue:

Basic 58,010,322 44,100,930 Diluted 58,918,289 44,120,817 Basic earning per share 0.095 0.103 Diluted earning per share 0.095 0.103

The effect of 2.9m share options granted in August 2019 contributed to the difference between basic weighted average number of shares and diluted weighted average number of shares.

Page 35: Tekcapital PLC (Tekcapital, the Company or the Group) · Posting of Annual Report and Accounts The Company's annual report and accounts for the year ended 30 November 2019 will be

Post period end, the Group completed a placement of 14,800,000 new ordinary shares and a conditional placement of 9,250,00 new ordinary shares.

11. Investments in subsidiaries

Company Shares in

subsidiaries US$

Loans to subsidiaries

US$

Total

US $

Cost and net book value As at 1 December 2018 79,265 1,875,748 1,955,013 Additions during the year - - - Disposal during the year - - - Foreign currency translation differences 161 3,829 3,990

Balance at 30 November 2019 79,426 1,879,577 1,959,003

Subsidiaries name (consolidated)

Proportion of ordinary shares directly held

Nature of business

Capital Net Profit/ and reserves (Loss)

Direct Tekcapital Europe Limited England and Wales

100% Provision of Intellectual

property research services

16,835,932 5,949,752

Tekcapital LLC USA 100% Provision of

Intellectual property research services

(3,167,902) (373,561)

Indirect

The following are directly owed by Tekcapital Europe Limited

Lucyd Limited England and Wales

100.00% Provider of high-tech

eyewear

(4,329,230) (258,466)

Salarius Limited England and Wales

91.7% Developer of low

sodium salt and

snack foods

(545,780) (453,039)

Guident Limited England and Wales

100.00% Developer of

autonomous vehicle

valet system

(276,465) (192,687)

Smart Food Tek Limited

England and Wales

100.00% Developer for baked

food coating to

reduce fat

35,589 (3,271)

Page 36: Tekcapital PLC (Tekcapital, the Company or the Group) · Posting of Annual Report and Accounts The Company's annual report and accounts for the year ended 30 November 2019 will be

* As at the year end, the Company has no interest in the ownership of any other entities or exerts any significant influence over or provides funding which constitutes an “unconsolidated structured entity”. All UK subsidiaries are exempt from the requirement to file audited accounts by virtue of section 479A of the Companies Act 2006. Tekcapital Europe Ltd (registered address 12 New Fetter Lane, London, United Kingdom, EC4A 1JP) and Tekcapital LLC (registered address 12000 Biscayne Boulevard, Suite 222, Miami, Florida, 33133, United States) are consolidated by Tekcapital plc because they continue to provide advisory services in IP search and technology transfer. All other entities are measured at fair value through profit and loss based in IFRS 10 as referenced in Note 2.4. The Group provides management service support to Lucyd Limited, Salarius Limited and Guident Limited, as well as has provided working capital assistance to Salarius Limited through convertible loan note financing (see also Note 15). The Group also assists the entities with their fundraising activities. Registered office of all four subsidiaries owned by Tekcapital Europe Limited: Acre House, 11-15 William Road,

London, England, NW1 3ER

12. Financial Assets at Fair Value through Profit and Loss

Group’s investments in portfolio companies in the years ended 30 November 2019 and 30 November 2018 are listed below and classified as equity instruments. The principal place of business for portfolio companies listed below is England and Wales.

Group Proportion

of ordinary shares held

1 Dec 2018

Additions Disposal FX reval Fair Value change

30 Nov 2019

US $ US $ US $ US $ US $ US $ Guident Limited 100.00% 8,545,103 - - - 6,981,092 15,526,195 Lucyd Limited 100.00% 3,040,616 - - 500 (1,912,094) 1,129,022 Salarius Limited 97.50% 923,830 633 - 22 908,941 1,833,426 Belluscura Limited 18.90% 1,126,315 111,177 - 2,338 564,291 1,804,121 Smart Food Tek Limited 100.00% 43,073 - - 89 - 43,162 eSoma Limited 100.00% 24,750 - - - (24,750) - Non Invasive Glucose Tek Limited

100.00% 667 - - - (667) -

Total Balance 13,704,354 111,810 - 2,949 6,516,813 20,335,925

Company Proportion of

ordinary

shares held 1 Dec 2018

Additions Disposal FX reval Fair Value

change

30 Nov

2019

US $ US $ US $ US $ US $

Belluscura Limited 18.90% 1,126,315 111,177 - 2,338 564,291 1,804,121

Total Balance 1,126,315 111,177 - 2,338 564,291 1,804,121

30 November 2018:

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Group Proportion

of ordinary

shares held 1 Dec 2017

Additions Dispos

al

FX reval Fair Value

change

30 Nov

2018

US $ US $ US $ US $ US $

Guident Limited 100.00% - 23,494 - (7) 8,521,616 8,545,103

Lucyd Limited 100.00% 6,023,954 15,760 (16,757) (2,982,341) 3,040,616

Salarius Limited 100.00% 15,128 27,466 - (708) 881,944 923,830

Belluscura Limited 29.22% 981,762 560,090 - (60,839) (354,698) 1,126,315

Smart Food Tek Limited 100.00% 44,167 972 - (2,066) - 43,073 eSoma Limited 100.00% 10,983 13,768 - (1) - 24,750 Non Invasive GlucoseTek Limited 100.00% 24,199 425 - (981) (22,976) 667 eGravitas Limited 100.00% 154,535 43,955 - (5,807) (192,683) - Frigidus Limited 100.00% 52,968 7,483 - (1,853) (58,598) -

Total Balance

7,307,696

693,413 - (89,019) 5,792,264 13,704,35

4

Company Proportion

of ordinary

shares

held

1 Dec

2017

Additions Disposal FX reval Fair Value

change

30 Nov

2018

US $ US $ US $ US $ US $

Belluscura Limited 29.22% 981,762 560,090 (60,839) 354,698 1,126,315

Total Balance 981,762 560,090 - (60,839) 354,698 1,126,315

Total fair value gain of $6.5m for the year reflects uplift in value of shares of Guident and Salarius, offset mostly

by reduction in valuation of Lucyd Limited. Considering early stage of commercialisation, fair value of remaining

portfolio companies was recorded based on the cost of acquired IP, as their carrying amounts represent a

reasonable approximation of fair value.

The valuation techniques used fall under, Level 2 – Observable techniques, other than quoted prices, and Level

3- Other techniques as defined by IFRS 13. These techniques were deemed to be the best evidence of fair values

considering early stage of portfolio companies. There has been no transfer between levels during the period.

Fair value measurement hierarchy for financial assets as at 30 November 2019 with comparative amounts as of

30 November 2018:

Date of Valuation

Total

Significant

observable inputs

(Level 2)

Significant

unobservable

inputs (Level 3)

US $ US $ US $

Guident and others 30 November 2019 18,531,804 18,531,804

Belluscura Limited 30 November 2019 1,804,121 1,804,121

Total Balance 30 November 2019 20,335,925 1,804,121 18,531,804

Guident and others 30 November 2018 12,578,039 12,578,039

Belluscura Limited 30 November 2018 1,126,315 1,126,315

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Total Balance 13,704,354 1,126,315 12,578,039

Guident ($7.0m gain)

An external valuation by an independent patent valuation expert was prepared for Guident’ s IP portfolio

including:

1. US patent 9,429, 943 (“FAMU 943”)

2. International Patent Filing WO2019/147569: Visual Sensor Fusion and Data Sharing Across Connected Vehicles

(MSU 569) -added this period

3. US Patent No. 9,964,948 (FIU 948) - added this reporting period

The total fair value of $15.5m reflects the fair value of Guident’ s net assets as determined by:

• Valuation of FAMU 943 of US$16.2m (2018:US$10.3m) conducted by an external, qualified valuation expert using the Income Approach, Royalty Relief Method. Following valuation inputs were applied by the valuation expert:

- Total US market size of US$35b for autonomous vehicles and drones (as the patent applies to both) for the 11 years period ended 30 December 2033. 1% market penetration of Guident’ s patent starting in 2022 with annual increase of 1% leading to a 12% market penetration by 2033, resulting in projected US$3b in sales of drones/vehicles underlying licensing revenue between 2022 and 2033. This market penetration assumption is based on a number of factors:

o Broad protection and claims included in the IP

o The protection given to the product by its US patent, which effectively gives Guident a barrier to entry in the US through 2033

o The strength and experience of the management team, whose proven expertise is in the exact areas required to bring the product to market and build the brand;

o There are no foreseeable software development barriers in the commercialisation process o Other foreseeable challenges for directors to deliver successful commercialisation appear to be well within the abilities of directors to handle.

o Innovative nature of Guident’s IP and the fact that the AV market is dependent on innovators.

o Improving regulatory environment with more states in the United States legalizing

autonomous vehicles operation in 2019 including large states such as Florida and California.

The increase in FV of FAMU 943 compared to 2018 was driven by reduction in discount factor from 18% to

17% and increase in in the royalty rate from 5.375% to 6%.

• Valuation of MSU 569 of US$2.8m conducted by an external, qualified valuation expert using the Income Approach, Royalty Relief Method. Following valuation inputs were applied by the valuation expert:

- In January 2024, Guident also expects to introduce an additional, complementary component featuring

the MSU 569 technology (Sensory Fusion Component). This component would enable sensory data

sharing between the vehicles, providing for new safety standard. Guident expects the Sensor Fusion

Component to be sold to customers of the Standard Initial Component when 5G is available so as to

further generate an additional $500 of revenue for each sale of the Sensor Fusion.

For the estimate of the US market derived revenue, using the units of underlying Autonomous Vehicles

from FAMU 943, the management assumed 10% of FAMU customers would choose to pay for this

additional safety improving capability, starting with 10% of them in 2024 with the share growing to 40%

in 2027.

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For the estimate of the international market derived revenue, the management applied comparative

share of countries included in the international filing based on authoritative literature from the Allied

Market Research report.

These market penetration assumptions are based on assumptions similar to those considered for the patent

FAMU 943.

• Valuation of FIU 948 of US$0.3m conducted by an external, qualified valuation expert using the Income Approach, Royalty Relief Method. Following valuation inputs were applied by the valuation expert:

- US sidewalk delivery drone market size of US$1.27b between 2022 and 2036. 1% market penetration

starting in2022 with annual increase leading to 25% in 2027. This market penetration rate assumptions

is based on factors analogous to those listed for FAMU 943, with additional legislative/regulatory

requirements included as well. Recent regulatory developments in United States make it mandatory

to have back-up human control operators taking control of an AV in the event of an accident or mishap,

• Assumptions applied to valuations of all three patents above:

- Total 6% license royalty rate, with 3% royalty attributable to the university and 3% comprising

Guident’s licencing revenue based on comparable market transactions, with the exception of 30% for

FIU 48 (whereby 2.5% is due to the university)

- Corporate income tax rate of 19% applied to projected licensing costs saved 17% discount rate used

to discount proceeds as determined by opportunity cost (10%), inflation rate (2%) and technology risk

(5%)

- The deferred tax liability of (US$ 3.6m) recorded by Guident based on UK corporate tax rate of 19%

applied to the fair value gain associated with the patent

- Net book value of other assets and liabilities of <(US$0.2m).

- Guident Ltd obtains sufficient funding to execute their strategy.

Salarius (US$ 0.9m gain)

An external valuation by an independent patent valuation expert was prepared for US patent 8,900,650.

The fair value of US$ 1.8m recorded by the Group reflects the fair value of Group’s 97.5% stake in Salarius’ net assets valued at US$ 1.9m as determined by:

• Valuation of US patent 8,900,650 of US$ 3m (2018: US$ 1.1m) conducted by an external, qualified valuation expert using the Income Approach, Royalty Relief Method. Following valuation inputs were applied by the valuation expert:

- Sales of low sodium salt to snack food manufacturers (“B2B”) of US$ 44m for the 10-year period ended 2030. Market penetration of 0.5% in 2020 growing to 10% in 2030. These market penetration assumptions are based on a number of factors. This market penetration assumption is based on a number of factors:

o Microsalt is a unique product substantially in advance of alternative, developed, and tested in terms of market acceptability and ready to market;

o The protection given to the product by its US patent, which effectively gives Salarius a barrier to entry in the US for 11 more years;

o The strength and experience of the management team, whose proven expertise is in the exact areas required to bring the product to market and build the brand;

o There are no foreseeable manufacturing barriers in the commercialisation process. Manufacturing has been established and outsourced in 2019;

o Post period end, the company secured two food ingredient brokerage agreements for sales of Microsalt covering multiple geographical areas of the United States; First customers were secured

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o Other foreseeable challenges for management to deliver successful commercialisation appear to be well within the abilities of management to handle.

- Sales of salty snacks (“B2C”) estimated at $106m for the 10 year period ended in 2030. The projections

assume Salarius chips being sold in 300 individual stores by the end of 2020 growing annually to the

total of 16,400. This assumption is based on factors analogous to the B2B segment, with the addition of

following factors:

o Post year-end, the company secured distribution agreement with one of North America’s largest

natural food distributors for the launch of SaltMe snacks in all 4 flavors; the distributor supplies

thousands of stores on a daily basis

o Post year-end, the company secured sales contract brokerage agreement for sales of SaltMe

snacks in all 4 flavors;

- Licence royalty rate of 8.2% with 3% royalty attributable to the university and 5.2% comprising Salarius’ licencing revenue based on comparable market transactions

- 12% discount rate used to discount proceeds as determined by opportunity cost (10%) and inflation rate (2%). Technology risk was determined at 0%, as the patent describes easily manufactured salt compositions, maybe manufactured in many production facilities without extensive modifications. The end product has already been manufactured and used to conduct consumer acceptance tests. Sales and distribution channels have been established.

The increase in the fair value of US patent 8,900,650 was driven by addition of B2C sales projections in the forecast used in the valuation, increase in license royalty rate from 7.8% to 8.2% as well as reduction in discount rate used from 13% to 12%.

• The deferred tax liability of US$ 0.5m recorded by Salarius based on UK corporate tax rate of 19% applied to the fair value gain associated with the patent

• Net book value of liquid assets, creditors and debtors of < $0.6m.

The value of the IP is dependent on Salarius Ltd obtaining sufficient funding to execute their strategy.

Lucyd Ltd (US $1.9m loss)

The fair value of US$ 1.1m reflects the fair value of Lucyd’s net asset as determined by:

• Valuation of Lucyd’s significant assets performed by an external, qualified valuation expert:

- Lucyd’s e-commerce platform selling advanced and fashionable eyewear valued at US$ 1.2m as

determined by applying an 18% discount rate on $2.2m of gross profit projected through 2023. The 17%

discount rate was calculated as a total of 10% opportunity cost, 2% inflation rate and 3% technology

risk. The projections of gross profit were reduced compared to 30 November 2018 valuation

considering more R&D and product development focus in the past year.

- Lucyd’s trademarks valued at US$ 0.2m, assessed using Cost Approach Reproduction Method.

Through cost analysis, the fair value approximates cost recognized in Lucyd’s balance sheet

• The deferred tax liability of US$ 0.3m recorded by Lucyd based on UK corporate tax rate of 19%

applied to the fair value gain associated with the ecommerce platform.

Lucyd will be re-valuated in subsequent reporting periods. The future value of Lucyd could fluctuate

significantly, either up or down, based on the performance of the business and the achievement of product

development milestones.

Belluscura (US $0.6m gain)

The fair value of the holding increased by US$ 0.6m due to the most recent private placement held at 15 pence

per share in April 2019, compared to preceding placement at 10 pence per share in December 2018 used by

the Group to value its holding in Belluscura as of 30 November 2018. The Group contributed US$ 110,000

during this placement.

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eSoma (US$ 0.02m loss)

The Group closed eSoma Limited resulting in recognition of a US$ 0.02m fair value loss.

Smart Food Tek (Nil Gain / Nil loss)

The Group exercised judgment in determination of sufficiency of portfolio companies’ cash reserves, forecasts

and ability to raise money to achieve their fair values. Directors reviewed and questioned the forecasts used,

standing liquidity and working capital balances, as well as discussed capability and plans to raise money in the

future with directors or management of portfolio companies. Based on the review, the Group made a positive

determination as to portfolio companies’ likely ability to achieve fair values considering liquidity factors.

Description of significant unobservable inputs to valuation:

The significant unobservable inputs used in the fair value measurement categorised within Level 3 of the fair

value hierarchy, together with a quantitative sensitivity analysis as at 30 November 2019 are shown as below.

No sensitivities have been included on the other investments not listed in the table below as their fair value

equates to cost.

Investment

Valuation

Technique

Significant

unobservable

input

Estimate

applied

Sensitivity of the input to fair value

Lucyd Income

Approach

Discount to

Future Cash

Flows from

Eshop Sales

17% 5% increase in the discount factor

would decrease the Lucyd valuation

by $123,000, a 5% decrease in the

discount factor would increase the

Lucyd valuation by $149,000

Eshop adjusted

net profit

through

December

$1.9m A 20% increase in net profit would

increase the Lucyd valuation by

$239,000. A 20% decrease in gross

profit would decrease the Lucyd

valuation by 239,000.

Guident Income

Approach

Royalty

Relief

Method

Discount to

Future Cash

Flows from

licensing

17% 2% increase in the discount factor

would decrease the Guident

valuation by $2,300,000, a 2%

decrease in the discount factor

would increase the value by

$3,000,000

Royalty Relief

Rate

6%(FAMU,

MSU US,

MSU OUS)

and 30%

(FIU 948)

A 1% increase in the royalty relief

rate would increase the Guident

valuation by $5,300,000, a 1%

decrease in the royalty relief rate

would decrease the valuation by

$4,700,000

Gross licensing

proceeds & gross

revenue

$3.0b

(FAMU),

$286m

(MSU US),

$189m

(MSU OUS),

$8.8m

(FIU948)

A 20% increase in the gross licensing

proceeds and gross revenue would

increase the Guident valuation by

$3,500,000. A 20% decrease would

decrease the Guident valuation by

$2,800,000.

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Salarius Income

Approach

Royalty

Relief

Method

Discount to

Future Cash

Flows from

licensing

12% 5% increase in the discount factor

would decrease the Salarius

valuation by $644,000, a 5%

decrease in the discount factor

would increase the value by

$1,004,000

Licence Royalty

Rate

8.2% A 2% increase in the royalty rate

would increase the Salarius

valuation by $918,000 a 2%

decrease in the royalty rate would

decrease the Salarius valuation by

$918,000.

Projected sales $150m A 20% increase in the projected

sales would increase the Salarius

valuation by $477,000. A 20%

decrease in the projected sales

would decrease the Salarius

valuation by $477,000.

13. Intangible assets

Group Vortechs

Group

US $

Website

development

US $

Invention

Evaluator

US $

Total

US $

At 30 November 2018 500,000 28,121 338,769 866,890

At 30 November 2019 500,000 28,121 338,770 866,891

Accumulated amortisation and

impairment

At 30 November 2018 - (28,121) - (28,121)

At 30 November 2019 - (28,121) - (28,121)

Net book value

At 30 November 2019 500,000 - 338,770 338,770

At 30 November 2018 500,000 - 338,769 338,769

The intangible assets presented above are included within Professional Services segment under Note 5 disclosure. Costs of the Group’s website development have been fully amortized as of 30 November 2018. Under IAS38, the Group’s Invention Evaluator is regarded by the Directors as being an intangible asset with an indefinite useful life. The Directors believe that the asset is unique in that no competitor offering currently exists, the service is already proven to have appealed globally to many types of clients including Fortune 100 companies, there is no expectation of obsolescence in the foreseeable future, and the service from the use of the asset generates sufficient ongoing revenue streams. The Directors have carried out an impairment review and believe that the value in use is significantly greater than book value. The Directors have considered the recoverable amount by assessing the value in use by considering the future cash flow projections of the revenue generated by the Invention Evaluator intangible, cash flows were based on the past revenue generation. The projections were assessed for a three year period in order to determine

Page 43: Tekcapital PLC (Tekcapital, the Company or the Group) · Posting of Annual Report and Accounts The Company's annual report and accounts for the year ended 30 November 2019 will be

no impairment. The projections are based off revenue generation at US$300k less cost of sales at the 2018 gross profit margin, no growth has been applied forecasts. A discount factor at 10% (consistent with Group’s cost of capital) was used to determine no impairment. The revenue projections are based on company’s historical performance and existing pipeline of sales orders. The Invention Evaluator intangible’s recoverable amount exceeds its carrying amount by US$ 34,257. Under IAS38, the Group’s Vortechs asset is regarded by the Directors as being an intangible asset with an indefinite useful life. The Directors believe that this asset is unique as it operates in a niche market, it generates an ongoing revenue stream, and there is no expectation of obsolescence. This asset meets the requirements of IAS38 as it is: - Separately identifiable - The Group controls this asset - Future economic benefits flow to the Group in the form of service revenues from this asset - The cost of this asset can be measured reliably The Directors have carried out an impairment review and consider the value in use to be greater than the book value. The Directors have considered the recoverable amount by assessing the value in use by considering the future cash flow projections of the revenue generated by the Vortechs intangible, cash flows were based on the past revenue generation plus expected growth. The projections were assessed over a period in excess of 5 years on the basis the directors consider the projections can be reasonably forecast. The projections are based off revenue generation at US$400,000 per annum for 2020 and 2021 (approximating actual revenue from 2018), reducing to US$ 300,000 for 2022, US$ 350,000 for 2023 and back to US$ 400,000 until 2028. The cost of sales element for 2020 and 2021 was determined at 90% in line with the agreement, thereafter it drops to US$ 120,000 p.a. plus inflation at 5%. The reduction in cost of sale is due to the end of a term in the purchase agreement. A discount factor at 10% (consistent with Group’s cost of capital) was used to determine no impairment. Vortech’s intangible’s recoverable amount exceeds its carrying amount by US$ 518,258. The tech-transfer recruiting is viewed by directors as permanent part of the Group’s business and its offering. This together with the high turnover in this industry leading to continuous hiring needs leads Directors to apply projections of over 5 years in the impairment determination.

14. Fixed Assets

Group Leasehold

Improvements

US$

Office

Equipment

US $

Computer

Equipment

US $

Total

US $

Closing cost 30 November 2017 - 2,042 17,306 19,348

Exchange differences - 3 34 37

Additions 13,775 22,241 9,825 45,841

Disposals - (309) (309)

Closing cost 30 November 2018 13,775 24,286 26,856 64,917

Exchange differences 14 14

Additions - - 862 862

Closing cost 30 November 2019 13,775 24,286 27,732 65,793

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Accumulated depreciation and

impairment

At 30 November 2017 - (1,284) (12,059) (13,344)

Depreciation charge (6,888) (4,860) (6,631) (18,379)

Disposals - - 308 308

Exchange differences - 2 (16) (14)

At 30 November 2018 (6,888) (6,142) (18,398) (31,428)

Depreciation charge (6,888) (4,839) (5,271) (16,998)

Exchange differences - (14) (14)

At 30 November 2019 (13,775) (10,981) (23,683) (48,440)

Closing net book value

At 30 November 2018 6,888 18,143 8,458 33,489

At 30 November 2019 - 13,304 4,049 17,353

15. Trade and other receivables

Group 2019

US $

2018

US $

Trade receivables 144,944 59,655

Less provision for impairment of trade receivables - -

Trade receivables – net 144,944 59,655

VAT recoverable 14,333 40,329

Prepayments and debtors

Receivables from related parties

125,715

530,874

97,769

231,620

Total trade and other receivables 815,866 429,373

Non-current: convertible loan notes* 476,122 250,000

Company 2019

US $

201

US $

Receivables from Group companies 2,277,783 1,697,545

VAT 9,025 30,057

Prepayments 34,923 24,783

Total trade and other receivables 2,321,731 1,752,385

Non-current: convertible loans notes 476,122 250,000

The fair value of trade and other receivables are not materially different to those disclosed above. The Group’s

exposure to credit risk related to trade receivables is detailed in Note 3 to the consolidated financial statements.

*The Group and the Company hold three convertible loans issued by its portfolio company, Salarius Ltd for the

total of US$ 600,000, of which US$440,000 was drawn. The notes were issued at 10% coupon rate and included

option to convert the debt into shares at market price (no discount against future equity placements offered).

Market rate of 10% was applied in determination of the present value of cash flows related to both notes. The

US$ 50,000 note originated in September 2018 is payable on demand, however Directors do not anticipate the

repayment before or after November 2020. The US$ 300,000 note originated in October 2018 is payable by

Salarius on 29 October 2021 (term extended during the period) or can be converted into Salarius’ equity upon

occurrence of certain conversion events. The US$ 250,000 note originated in August 2019 is payable on 01

August 2021 or can be converted into Salarius’ equity upon occurrence of certain conversion events.

The Group also held a convertible loan issued by Guident Ltd in December 2018 for the total of US$300,000,

issued at 10% coupon rate including option to convert the debt into shares at market price (no discount against

Page 45: Tekcapital PLC (Tekcapital, the Company or the Group) · Posting of Annual Report and Accounts The Company's annual report and accounts for the year ended 30 November 2019 will be

future equity placements offered). The note can be converted into Guident’s equity upon occurrence of certain

conversion events.

The Group had outstanding receivables from its portfolio companies as at 30 November 2019 in the amount of:

- US$130,912 due from Lucyd Ltd

- US$141,849 due from Salarius Ltd

- US$254,667 due from Guident Ltd

The Company recorded a historical US$2,500,000 provision against its receivable from one its subsidiaries,

Tekcapital LLC.

16. Cash and cash equivalents

Group 2019

US $

2018

US $

Cash at bank and in hand 472,899 1,165,442

Total cash and cash equivalents 472,899 1,165,442

Company 2019

US $

2018

US $

Cash at bank and in hand 112,114 698,694

Total cash and cash equivalents 112,114 698,694

17. Categories of financial assets and financial liabilities

Group 2019

US $

2018

US $

Financial assets

Financial assets at fair value through profit and loss 20,335,925 13,704,354

Loans and receivables at amortised cost 1,291,988 679,389

Cash and equivalents 472,899 1,165,442

22,100,812 15,549,185

Financial Liabilities

Trade and other payables at amortised cost 303,847 275,601

Company 2019

US $

2018

US $

Financial assets

Financial assets at fair value through profit and loss 1,804,120 1,126,315

Loans and receivables at amortised cost 2,797,853 1,997,602

Cash and equivalents 112,114 698,694

Available for sale 1,959,003 1,955,013

6,673,090 5,777,624

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Financial liabilities

Trade and other payables at amortised cost 484,375 470,809

18. Share capital and premium

Share capital

Group and Company Number of

shares

Ordinary

Shares US $

Total

US $

Issued and fully paid up

At 30 November 2017 42,654,707 264,221 264,221

Shares issued in further public offering 11,698,335 61,815 61,815

At 30 November 2018 54,353,042 326,036 326,036

Shares issued in further public offering 9,375,000 46,948 46,948

At 30 November 2019 63,728,04 372,984 372,984

The shares have full voting, dividend and capital distribution (including on winding up) rights; they do not confer any rights of redemption. The following shares were issued during the year: July 2019 - 9,375,000 shares were issued in the placing of new ordinary shares at £0.08p. Total proceeds of US$938,966 were netted against cost of raising finance in the amount of US$117,277. The Company has authorised share capital of 81,529,563, with a nominal value of £0.004. Of these shares, 63,728,042 were issued and fully paid up.

Share premium

Group and Company

Share

premium

US $

Total

US $

At 30 November 2017 9,271,098 9,271,098

Shares issued in further public offering

1,097,216

1,097,216

Cost of shares issued (149,509) (149,509)

As at 30 November 2018 10,218,805 10,218,805

Shares issued in further public offering 892,018 892,018 Cost of shares issued (117,277) (117,277)

As at 30 November 2019 10,993,546 10,993,546

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19. Reserves

Profit and Loss Account Group

Profit and

Loss Account

US $

Company

Profit and

Loss Account

US $

At 30 November 2017 931,826 (4,241,264)

Profit/(loss) for the year 4,554,625 (920,213)

Share based payments 30,204 30,204

At 30 November 2018 5,516,655 (5,131,273)

Profit/(loss) for the year 5,518,290 30,668

Share based payments 20,876 20,876

At 30 November 2019 11,055,821 (5,079,729)

Merger reserve

Group Merger reserve

US $

At 30 November 2018 (72,169)

At 30 November 2019 (72,169)

Translation reserve Group

Translation

reserve

US $

Company

Translation

reserve

US $

At 30 November 2017 280,985 77,277

Foreign exchange loss (135,342) (179,246)

At 30 November 2018 145,643 (101,969)

Foreign exchange gain 31,855 3,883

At 30 November 2019 177,498 (98,086)

20. Trade and other payables

Group 2019

US $

2018

US $

Trade creditors 116,936 91,303

Social security and other taxes 6,089 10,357

Accruals and other creditors 187,135 184,297

310,160 285,957

Company 2019

US $

2018

US $

Accruals and other creditors 362,863 357,529

Accruals, deferred income and other creditors 121,512 113,279

484,375 470,808

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The fair values of trade and other payables are not materially different to those disclosed above. The Group’s exposure to currency and liquidity risk related to trade and other payables is detailed in note 3 to the accounts.

21. Deferred Revenue The Group received a payment in the amount of US$118,595 for Invention Evaluator reports to be delivered after 30 November 2019, therefore the amount was recognized as deferred revenue.

22. Deferred income tax

Unused tax losses for which no deferred tax assets have been recognised is attributable to the uncertainty over the recoverability of those losses through future profits. A tax rate of 19% has been used to calculate the potential deferred tax.

Deferred tax

Group 2019 US $

Group 2018 US $

Company 2019 US $

Company 2018 US $

Accelerated capital allowances (3,230) (3,072) - - Short term timing difference - - - - Tax losses (1,791,410) (1,127,294) (435,092) (435,092) Unprovided deferred tax asset 1,794,639 1,130,366 435,092 435,092

- - - -

23. Dividends

No dividend has been recommended for the year ended 30 November 2019 (2018: Nil) and no dividend was paid during the year (2018: Nil).

24. Cash used from operations

Group 2019

US $

2018

US $

Profit before income tax 5,520,635 4,555,894

Adjustments for

- Depreciation 16,998 18,070

- Share based payment expense 20,876 30,204

- Movement in foreign exchange 33,776 (11,127)

- Movement in trade and other receivables - Financial assets at fair value through the profit or

loss - Deferred revenue movement

(612,615)

(6,519,761)

118,595

284,536

(5,792,264)

-

- Trade and other payables 24,202 48,310

Cash used (1,397,294) (866,377)

25. Commitments

Capital commitments The Group entered into convertible loan note agreement in September and October 2018 with Salarius Ltd for the total amount of US $ 350,000 (US$ 300,000 drawn by November 2019). Third convertible loan note agreement was signed in August 2019 for the total amount of US$250,000. US$140,000 was provided as part of that agreement by the Group by November 2019.

Operating lease commitments The Group’s subsidiaries have various office rental agreements. The total un-provided minimum lease commitment under non-cancellable operating lease are:

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Group 2019

US $

2018

US $

Arising:

No later than 1 year 61,925 59,847

Later than 1 year and no later than 5 years 61,925

Total 61,925 121,772

26. Share based payments

The Group operates an approved Enterprise management scheme and an unapproved share option scheme. The fair value of the options granted is expensed over the vesting period and is arrived at using the Black-Scholes model. The assumptions inherent in the use of this model are as follows:

Attribute Input

No. of options granted

5,785,000

Share price at date of grant £0.08-£0.46

Exercise price £0.08-£0.46

Options life in years 5

Risk free rate 1.50%

Expected volatility 41%-60%

Expected dividend yield 0

Fair value of options £0.03-£0.09

The weighted average fair value of options outstanding was £0.05p. Volatility was calculated using Group’s

historical share price performance since 2015. The share-based payment expense for the year was $20,876

(2018: $30,204). Details of the number of share options and the weighted average exercise price outstanding

during the year as follows:

2019 2018

Group and Company

Av. Exercise

price per

share £

Options

(Number)

Av. Exercise

price per

share £

Options

(Number)

As at 1 December 0.3164 3,585,000 0.3379 3,285,000

Granted 0.0781 2,900,00 0.0810 300,000

Exercised - - - -

Forfeited 0.2500 700,000 - -

As at 30 November 0.2110 5,785,000 0.3164 3,585,000

Exercisable as at 30 November 2,610,000* 2,951,667

*The weighted average exercise price for the options exercisable as at 30 November 2019 and 30 November

2018 was £0.34p and £0.33p respectively

The weighted average remaining contractual life is 2.65 years (2018: 1.82 years). The weighted average fair

value of options granted during the year was £0.05p (2017: £0.07p).The range of exercise prices for options

outstanding at the end of the year was £0.065p - £0.46p (2018: £0.081p - £0.46p).

27. Related party transactions

Details of Directors’ remuneration and grant of options are given in the Directors’ report. The Group had an outstanding payable balance in the amount of $7,379 payable to Dr Clifford Gross as at 30 November 2019. The Group has taken advantage of the exemption in IAS 24 “related parties” not to disclose transactions with other Group companies.

Page 50: Tekcapital PLC (Tekcapital, the Company or the Group) · Posting of Annual Report and Accounts The Company's annual report and accounts for the year ended 30 November 2019 will be

525,000 options were held by Harrison Gross, family member of Dr. Clifford Gross.

28. Events after the reporting period Tekcapital Group strengthened the board of directors with post period end appointments of Lord David Willetts (7 January 2020) and Mr. Louis Castro (2 December 2019). The Rt Hon Lord Willetts FRS is President of the Resolution Foundation and former U.K. Minister for Universities and Science. He served as the Member of Parliament for Havant (1992-2015), and previously worked at HM Treasury and the No. 10 Policy Unit. Louis Castro is a highly experienced and well qualified Director and Chartered Accountant with some thirty years spent in industry and in financial services, including positions as Chief Executive, Finance Director and Non-Executive Director of several AIM listed companies. He was previously the CFO at Eland Oil & Gas plc where he had full executive responsibility for finance, legal, corporate finance and a budget of over $150m. On 6 February 2020, Tekcapital Group completed a placing of 14,800,000 new ordinary shares at 5 pence each to raise US$962,000 before expenses. On 18 March 2020, the Company signed an extension to Convertible Loan agreement with Salarius Ltd dated 29 October 2018. The extension revised the maturity date to be three years from 29 October 2018. On 1 May 2020, Tekcapital Group completed a conditional placing of 9,250,000 ordinary shares at 10 pence each to raise US$1,150,000 before expenses. The existing authorities to allot shares and disapply pre-emption rights under section 551 and section 570 of the Companies Act 2006, were insufficient to enable the Company to allot and issue the full amount of the Placing Shares pursuant to the Placing. Accordingly, the Placing will be conditional upon, amongst other things, the passing of certain resolutions at a General Meeting of the Company to allot the Placing Shares and to disapply statutory pre-emption rights which would otherwise apply to such allotment. Post period end, the coronavirus pandemic emerged that may produce negative economic activities which could reduce Group’s economic performance and the performance of its portfolio companies in ways that are difficult to quantify at this juncture. It may cause a recession in the markets in which the Company operates, reduce the Company’s net asset values, revenue, cash flow, access to investment capital and other factors which could negatively impact the Company.


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